Aurobindo Pharma to sell US-based Natrol for about Rs 4,048 crore

 Hyderabad-based Aurobindo Pharma has reached a definitive agreement to sell its US subsidiary Natrol LLC to private equity firm New Mountain Capital and its affiliate Jarrow Formulas in an all-cash transaction valued at $550 mn (about Rs 4,048 crore). This would make Aurobindo a zero-debt company and also help it repay loans, analysts said.

The deal, subject to customary closing conditions and regulatory approvals, is expected to close by January.

Aurobindo said Natrol, which it acquired in December 2014, had been a “consistently profitable business” growing on all fronts. Natrol’s annual sales for the 12 months ended March 2020 were worth around $157 million.

Aurobindo’s stock reacted positively to the news, going up in morning trade but later settled flat at Rs 784.65 on the BSE. The Nifty Pharma index was down 1.6 per cent on Monday.

The US constitutes around 50 per cent of the company’s turnover, and Europe 22 per cent.

At the end of the first quarter of FY21, Aurobindo’s net debt stood at $168 million. In the June quarter, its revenue from the US business grew 15.6 per cent to Rs 3,107 crore, about 52.4 per cent of the consolidated revenue. In FY20, the company posted a robust growth rate of 18 per cent in its revenue from operations to Rs 23,098 crore, even as its US business grew 27 per cent.

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“Aurobindo is committed to evaluating and concluding strategic options towards focused portfolio enhancement with the ultimate objective of enhancing stakeholder values. We are pleased to sell the Natrol business to an outstanding private equity player, who could focus additional resources to grow Natrol, its products and brands further,” said N Govindarajan, the firm’s managing director. He added that the proceeds from the sale of Natrol would be used to reduce debt and for other new strategic initiatives.

Brokerages said the deal was lucrative for Aurobindo. Surajit Pal, an analyst with Prabhudas Liladhar, told Business Standard that besides making Aurobindo a zero-debt company, this transaction would help it pay $100 million towards buying a minority stake in Eugia plant. Pal said the sale of Natrol was a good decision as it was an over-the-counter company (it sells nutraceuticals, etc) and did not go with the core business of Aurobindo.

According to ICICI Direct Research, at $550 million, the transaction values the business at 3.5x the sales, which is a compelling deal by any standards.

Earlier this year, Aurobindo had called off its plans to acquire Sandoz's dermatology and oral solids generics portfolio in the US as the approval from the US Federal Trade Commission was not obtained within the anticipated timeline. Aurobindo was looking at acquiring Sandoz’s portfolio for $900 that would have catapulted it to the second-largest generics player in the US in terms of number of prescriptions.

Aurobindo had earlier acquired Actavis’ portfolio and Apotex’s European operations. It is now smartly trying to shift the production of the Apotex portfolio to India, which would reduce its costs and boost margins.

Aurobindo terminates $900-million Sandoz product acquistion deal

Indian drug major Aurobindo Pharma Limited on Thursday announced the termination of the $900-million buy-out agreement it had entered with Sandoz Inc for US generic oral solids and dermatology business back in September 2018.

A mutual decision to terminate the agreement was taken as the approval from the US Federal Trade Commission was not obtained within anticipated timelines, Aurobindo said in a filing.

Even though the wait for the regulatory nod to conclude the transaction had got stretched beyond multiple time-lines in the past 19 months, the Thursday's announcement came as a bit of a surprise. The Aurobindo leadership as recently as in in the first week of February said they were about to get the necessary approvals in a month or two. The company had actively pursued the deal till the last minute.

The transaction would have not only been the biggest among Aurobindo's previous acquisitions but also would have seen more than doubling of its US revenues on a consolidated basis surpassing $ 2 billion, had it been concluded.

Focussed on further expanding its US business, Aurobindo had entered into a deal to buy Sandoz's dermatology business and a portfolio of oral solids comprising 70 percent of the products on offer for divestment by the Novartis AG's subsidiary.

The proposed deal also included three manufacturing facilities in the US, and 100 percent share-holding in Sadoz's subsidiary Eon Labs besides 300 products among several authorised generics, in-licensing products and branded dermatology products.

Talking to analysts on February 7, Aurobindo chairman P V Ram Prasad Reddy said they were hoping to receive the approval for Sandoz deal in the same month, while MD N Givindarajan explained that the approval would not stretch beyond March, 2020 as it was in the final leg. The company was preparing to present the consolidated financials from April 1.

With the deal being off the table, Aurobindo will lose an up front opportunity to become the second largest generics player in the US, though its aim to become debt-free would be achieved quicker than anticipated now as the transaction was to be funded through debt.

Aurobindo had reported Rs 16,993 crore in consolidated revenues for the nine on period ending December 2019, almost half of it generated from the US business.

Aurobindo Pharma surges 19% as Unit IV receives EIR with VAI staus from FDA

Shares of Aurobindo Pharma surged 19 per cent to Rs 594 on the BSE in early morning deal on Wednesday after the company’s Unit IV received Establishment Inspection Report (EIR) with Voluntary Action Initiated (VAl) status from the US health regulator.

At 09:21 am, the stock was trading 13 per cent higher at Rs 563, as compared to 0.87 per cent rise in the S&P BSE Sensex. A combined 4.58 million shares changed hands on the counter in the first six minutes of trade on the NSE and BSE.

“The Company has received the Establishment Inspection Report (EIR) with Voluntary Action Initiated (VAl) status from the US Food & Drug Administration (USFDA) for Unit IV,” Aurobindo Pharma said in an exchange filing today.

The USFDA had inspected Company's Unit IV, a general injectable formulation manufacturing facility situated at Pashamylaram, Hyderabad, from 4th to 13th November 2019. At the end of the inspection, the company had issued a 'Form 483' with 14 observations.

On November 13, 2019, Aurobindo Pharma had informed the stock exchanges that it believed that none of these observations are related to data integrity issues.

Currently, Unit 4 has 15 abbreviated new drug applications (ANDA) approvals pending over next one year.

“Aurobindo Pharma remains focused on US generics, on the back of a strong ANDA pipeline with good mix of complex generics. The company is also in the process of integrating Apotex and hopes to derive further synergies from it for its Europe business,” analysts at Motilal Oswal Securities said in Q3FY20 result update.

“Based on integration of the Sandoz business and increasing market share for already commercialized products, we expect 15 per cent CAGR in earnings over FY19-22E. We value Aurobindo Pharma at 9x12-month forward earnings to arrive at price target of Rs 645,” it added.

Aurobindo's oral solid formulations unit under USFDA scrutiny

The US Food and Drug Administration (US FDA) has escalated the audit observations issued for Unit 7 of Aurobindo Pharma Limited in October, 2019 to the Official Action Indicated (OAI) level in a latest communication to the company.

The latest classification of the audit evaluation indicates the regulatory and/or administrative actions will be recommended against the unit by the US drug regulator based on the objectionable conditions found during the inspection,

Aurobindo's Unit 7 oral solids formulations manufacturing facility located at Polepally in Telangana was issued Form 483 with 7 observations after a CGMP (current good manufacturing practices) inspection was conducted from September 19-27, 2019. Though the company maintained that it was confident of addressing these issues within the stipulated timeline, the OAI classification signals that the issues flagged during the previous inspections remain unresolved.

The company in a filing on Thursday said the OAI classification will not have any material impact on the existing revenues or the supplies to its US business at this juncture. "The company will work closely with the regulator to comprehensively address the issues,"it has added.

The year 2019 was a challenging year for Aurobindo on regulatory compliance front as half a dozen of its manufacturing facilities fell short of the aspects involving compliance parameters or the manufacturing practices prescribed by the US drug regulator. In June, 2019 the company had received a warning letter from the US FDA for Unit 11 active pharmaceutical ingredients (API) manufacturing facility in Srikakulam of Andhra Pradesh for CGMP issues among other things.

AuroMedics Pharma recalls over 59000 vials of antipsychotic injection in US

Aurobindo Pharma arm AuroMedics Pharma LLC is recalling 59.5 thousand vials of antipsychotic Fluphenazine Decanoate injection USP 125mg/5mL, (5 mL multiple dose vial) from the US market, the USFDA said.

AuroMedics Pharma LLC is recalling 59,500 vials of the injection on account of "Discoloration; hazy solution found in one vial instead of a clear solution," the US heath regulator said in its latest Enforcement Report.

The product was distributed to major wholesalers/distributors who may have further distributed the product throughout the US, it added.

The voluntary ongoing recall is a class II recall, the United States Food and Drug Administration (USFDA) said.

As per the regulator, class II recall is initiated in a "situation in which use of or exposure to a violative product may cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote".

Fluphenazine Decanoate Injection, USP is a long-acting parenteral antipsychotic drug intended for use in the management of patients requiring prolonged parenteral neuroleptic therapy (for example chronic schizophrenics).

Aurobindo recalls heartburn drug ranitidine, two others from US market

Aurobindo Pharma Limited has initiated a nationwide recall of three drugs from the US, two of them due to manufacturing issues. The development comes close on the heels of the regulatory compliance issues being faced by several of its manufacturing facilities back home.

These three products include heartburn drug Ranitidine that the US Food and Drug Administration(US FDA) had recently asked the companies to withdraw from the market owing to the presence of carcinogenic nitrosodimethylamine (NDMA) compound above the daily acceptable intake limits in the formulation.

The recall of ranitidine was in different dosages of tablets and capsules of 30-500 count bottles, totalling 276,048 bottles besides 19,320 bottles of Ranitidine syrup, according the FDA.

The company has also initiated a voluntary recall of 197,000 vials of Amiodarone Hydrochloride injection, which is used in treating irregular heartbeat in patients, and 112,00 vials of local anesthetic Lidocaine HCL injection belonging to specific batches. All three drugs were distributed by Aurobindo Pharma's US subsidiary AuroMedics Pharma LLC. Aurobindo started recalling the formulations in the first and the second weeks of November.

The action on Ranitidine and Lidocaine, defined as a Class-II recall, was taken due to the presence of foreign and potentially harmful material in the drug that could cause temporary or medically reversible adverse health consequences. In the case of Amiodarone, the company has initiated a class III recall after the visible presence of particulate matter in the vials due to crystallisation, though the product is unlikely to have any adverse health impact.

In April, the US FDA said it had asked the companies to recall the heartburn drug from the market as the formulation was found to contain carcinogenic material. Last month, several companies including Dr Reddy's and GSK had recalled their Ranitidine generics from the US market.

In recent times the generic drug firms had to face two industry-level recalls, the first involving the blood pressure-lowering drug sartans, followed by ranitidine, due to the presence of carcinogens in the active ingredients of the respective medicines.

Aurobindo Hyderabad plant in regulatory trouble, share price falls 8%

Aurobindo Pharma Limited scrip fell more than 8 per cent on Bombay Stock Exchange on Thursday reacting to the latest adverse inspectional outcome at the company's Unit 4, Injectable formulations facility at Pashamylaram in Hyderabad.

The US Food and Drug Administration (USFDA) issued Form 483 with 14 observations to the company following the completion of inspection from November 4-14.

This is Aurobindo's third facility to receive critical observations from the US drug regulator in this month and the sixth facility that failed to pass the US FDA inspection since June this year. The company was issued a Warning Letter for one of its manufacturing facilities earlier this year.

The company's share traded 8.90 per cent lower at Rs 395.50 during the afternoon trade on Thursday following the development. In a late evening filing the company admitted that they were issued a Form 483 with 14 observations for the Pashamylaram formulations facility.

However, the company maintained that none of these observations were related to data integrity issues and will respond to the US FDA within the stipulated time-line to address the latter's concerns regarding the same.

Sebi imposes Rs 22.7 crore fine on Aurobindo Pharma for insider trading

The Securities Exchange Board of India (SEBI) has imposed penalties of Rs 22.7 crore on Aurobindo Pharma, its related entities and promoters for violating insider trading rules with respect to a licensing deal it had entered with Pfizer in 2009.

The order from SEBI on Monday stated that the penalties were imposed under Section 15G and Section 15HB read with Section 15J of the SEBI Act.

According to the order, a penalty of Rs 5 crore was imposed on P V Ramprasad Reddy, Rs 2 crore on P Suneeta Rani, Rs 10 lakh on Kambam P Reddy, Rs 6 crore on Trident Chemphar Ltd, Rs 10 lakh on Veritaz Health Care Ltd, Rs 7.5 crore on Top Class Capital Markets Pvt Ltd and Rs 2 crore on Aurobindo Pharma Ltd under Section 23E of Securities Contracts (Regulation) Act and Section 15HB of SEBI Act.

The order said that the penalty amount will be paid within 45 days of receipt of this order.